State's revenue from lottery tops casino payments for 1st time in 15 years

Sunday

Aug 11, 2013 at 12:01 AMAug 11, 2013 at 11:19 AM

For the first time in 15 years, the state of Connecticut is collecting more revenue from the lottery than from slot machines at the two tribal casinos.

SUSAN HAIGH

For the first time in 15 years, the state of Connecticut is collecting more revenue from the lottery than from slot machines at the two tribal casinos.

Data compiled by the Department of Consumer Protection’s gaming division show the Connecticut Lottery Corp. transferred $312.1 million to the state’s General Fund for the fiscal year 2013 that ended June 30. The fund is the main spending account for state government.

In comparison, Foxwoods Resort Casino and the Mohegan Sun, owned and operated by the Mashantucket Pequot and Mohegan tribes respectively, transferred a total of nearly $296.4 million to the fund as the state’s share of their slot machine revenue.

“Ten years ago, it would have been unthinkable,” said I. Nelson Rose, a professor at Whittier Law School in Costa Mesa, Calif., and an expert on gambling law.

Rose suspects that changes in lottery gambling, such as giant multistate payouts and increased competition for the casinos from neighboring states, are behind the latest revenue development.

“We have reached the stage where casinos have to be very careful because wherever they open up, there’s competition,” Rose said.

Under separate agreements, the Mashantuckets and Mohegans agreed to pay the state 25 percent of their gross slot machine revenues as long as no one else in the state “lawfully operates ... (any) commercial casino games.”

The high point for revenue to the state from both tribes was in 2007, when they contributed a total of nearly $430.5 million — $229 million from Mohegan Sun and nearly $201.4 million from Foxwoods. Since then, the contributions have steadily declined.

State revenue estimates reached between the state’s Office of Policy and Management and the General Assembly’s Office of Fiscal Analysis predict tribal payments will keep declining, to $285.3 million in fiscal year 2014, $280.4 million in 2015 and $280.3 million in 2016.

“We’re basically saying it’s going to continue to slide,” said OPM Secretary Benjamin Barnes, the state’s budget director. “I don’t think anybody is under the illusion that they’ll be bouncing back to $350 million a year, $400 million a year. We’re hoping the slide ends and they stabilize soon, but we’re trying to be realistic about it.”

Meanwhile, the administration and the legislature’s fiscal office predict modest increases in revenue from the state lottery, even with the planned addition of keno.

Department of Consumer Protection data show fiscal year 1998 was the last time before fiscal 2013 that the lottery generated more revenue for the state than the two casinos. During fiscal year 1998, the lottery transferred nearly $264.3 million to the state’s coffers while the two casinos transferred $256 million.

According to the quasi-public Connecticut Lottery Corp.’s most recent annual report, released in May, the lottery achieved record sales totaling nearly $1.1 billion in fiscal year 2012, an increase of $65.1 million from the previous fiscal year.

The lottery credited a number of factors for its total sales increase, including higher sales of instant tickets and higher sales of multistate games, such as Powerball, Mega Millions and Lucky for Life. Also, 2012 was a leap year, meaning an extra day for sales.

“By going multistate, they’ve created these attention-getting, life-changing prizes, which the casino industry simply can’t compete with,” said Rose, adding that the lottery industry has also gotten smarter over the years by understanding their customers better, such as giving them “near misses” to keep them interested in games.

In January 2012, Powerball changed its matrix to increase the chances of winning. It also increased the starting jackpot.

In a letter to Gov. Dannel P. Malloy and the lottery’s board of directors, Anne Noble, the lottery’s president and CEO, said even though Connecticut’s economy has been slow to recover from the 2008 downturn, the lottery industry and the Connecticut Lottery Corporation experienced growth in sales and profits during fiscal 2012. She predicted improved consumer confidence and lower unemployment rates will improve prospects for further gains in sales and profits.

“Our players will continue to evaluate their own current financial condition and continue to adjust their spending habits,” she said. “Management will continue to monitor economic developments and will accordingly re-evaluate its business plans and products.”

Despite the drop-off in casino revenues, Connecticut relies more on the $10 billion it collects annually from the personal income tax than on the approximately $600 million it collects in total gambling revenues from the lottery, Indian gaming payments, off-track betting and charitable games to balance its annual $20 billion budget, Barnes said.

“These are important, but they’re not even in the top five,” he said, referring to state revenue sources. “For the Indian gaming payments, it is a budget issue for us, but more importantly, it’s an employment issue for southeastern Connecticut.”